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NORDIC – Curve hits fresh 2-year low on wet, mild outlook

(Montel) Nordic power contracts continued their fall on Friday, with the Q2 contract hitting a fresh two-year low amid mild and wet weather forecasts.

The bellwether Q2 20 contract fell to EUR 23/MW in early trade, down EUR 0.90 on the day and its lowest since March 2018, though it had recovered to EUR 23.60/MWh at the time of writing on Nasdaq Commodities. February was last seen down EUR 1.05 at EUR 28.05/MWh.

“Prices are falling because of a mild, wet and windy weather outlook and a better hydrological balance than normal,” said a Norwegian portfolio manager.

The latest forecasts showed potential hydropower output from rain and snow over the next 10 days in a 11.4 -17.9 TWh range, far above the seasonal norm of 6.9 TWh, according to Energy Quantified (EQ).

Temperatures were expected to stay 1.5-5.7C above the seasonal norm throughout this period, EQ added. 

The wet and mild weather would improve the hydrological balance – which measures energy stored in soil, snow and reservoirs – from a current surplus of 11.3 TWh to 17.4 TWh above normal in two weeks, EQ data showed.

“In Norway, temperatures in the major cities this January have been the highest since 1998, when they averaged 5.4C above normal. There are no indications in today’s long-term forecasts of a return to dry and cold weather,” said Roar Teigen, meteorologist at StormGeo.

Further out on the curve, the Cal 21 power contract last traded down EUR 0.32 at EUR 31.43/MWh.

Falling gas prices contributed to the front-year contract’s decline, even though carbon prices were slightly up, said the portfolio manager.

Front-year gas on the Dutch TTF hub was last seen down EUR 0.1 at EUR 15.85/MWh, while the Dec 20 EUA contract gained EUR 0.23 to EUR 25.08/t.

Spot to fall

Closer in, the day-ahead contract was last quoted in a bid-offer range of EUR 23.50-25/MWh, compared to the current system price of EUR 24.55/MWh.

The portfolio manager expected the system price to fall to around EUR 24/MWh, because of typically less consumption. 

Nordic wind power generation was expected to ease from an average of 8.1 GW currently to 7.6-8.3 GW on Saturday, according to EQ, while consumption was set to fall from 50.6 GW to 47.4-48 GW.

Montel’s AI-based model expected a Saturday spot price of EUR 24.05/MWh, while EQ pegged it at EUR 22.88/MWh.


Reporting by:
Kjersti Dalfest
11:27, Friday, 17 January 2020